| Tue 10 May 2005, 9:23 | | Financial results for the year ended 28 Feb 05 |
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Altron - Audited abridged consolidated financial results for the year ended 28
February 2005.
ALLIED ELECTRONICS CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1947/024583/06)
(Share code: ATN) (ISIN: ZAE000029658)
(Share code: ATNP) (ISIN: ZAE000029669)
(`Altron`)
AUDITED ABRIDGED CONSOLIDATED FINANCIAL RESULTS FOR THE YEAR ENDED 28 FEBRUARY
2005.
Highlights
- Revenue up 22%
- Operating income up 35%
- HEPS up 17%
- Dividend up 21%
ABRIDGED INCOME STATEMENT
% 2005 2004
Figures in R millions Change (Audited) (Audited)
Revenue 22 12 206 10 045
Operating income before goodwill
amortisation/impairment and capital items 35 968 718
Investment income 100 145
Finance costs (62) (26)
Income from associates 24 9
Income before goodwill amortisation/
impairment and capital items 1 030 846
Goodwill amortised and impaired (300) (134)
Capital items (Note 1) 114 (5)
Income before taxation 844 707
Taxation (340) (255)
Income after taxation 504 452
Attributable to minority
shareholders 104 148
Attributable to ordinary and
participating
preference shareholders 400 304
504 452
Basic earnings per share (cents) 145 112
Headline earnings per
share (cents) 17 161 138
Diluted basic earnings per
share (cents) 134 109
Diluted headline earnings per
share (cents) 150 135
Dividends per share (cents) - paid 52 43
- proposed 21 63 52
Weighted average number of
shares (millions) 276 273
Diluted weighted average number
of shares (millions) 282 278
ABRIDGED BALANCE SHEET
(Audited) (Audited)
Figures in R millions 2005 2004
Assets
Non-current assets 2 321 1 618
Property, plant, equipment 847 671
Intangible assets 37 7
Goodwill 794 455
Rental finance advances 106 189
Associates and other investments 423 183
Deferred taxation 114 113
Current assets 4 457 4 451
Inventories 1 158 905
Accounts receivable 1 779 1 542
Net cash and cash equivalents 1 520 2 004
Total assets 6 778 6 069
Equity and liabilities
Total equity 3 566 3 571
Shareholders` equity 2 612 2 489
Minority interest 954 1 082
Non-current liabilities 744 318
Long-term liabilities 489 277
Empowerment funding obligation 172 -
Long-term provision 30 10
Deferred taxation 53 31
Current liabilities 2 468 2 180
Total equity and liabilities 6 778 6 069
Net asset value per share (cents) 939 907
Shares in issue at end of
period (millions)
- ordinary shares 94 94
- participating preference shares 184 180
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Share
capital and Treasury Reserves Retained
Figures in R millions premium shares earnings
Balance at 28 February 2003 (Audited) 770 (238) 221 1 514
Changes in accounting policy
(see note 4) 23 (7)
Restated balance 770 (238) 244 1 507
Opening AC 133 fair value
adjustment (17)
Transfer between reserves (40) 40
Foreign currency
translation differences (18)
Cash flow hedging reserve (1)
Attributable earnings 304
Dividends (117)
Issue of share capital 19
Change in shareholding of
subsidiaries 36
Decrease in loans with
outside shareholders
Effect of adopting proportionate
consolidation
Balance at 29 February 2004 (Audited) 789 (238) 221 1 717
Transfer between reserves (22) 22
Foreign currency translation differences (32)
Release of translation surpluses (67)
Cash flow hedging reserve 1
Attributable earnings 400
Dividends (143)
Issue of share capital 17
Change in shareholding
of subsidiaries (53)
Decrease in loans with
outside shareholders
Balance at 28 February 2005 (Audited) 806 (238) 48 1 996
Shareholders Minority Total
Figures in R millions equity interest equity
Balance at 28 February 2003 (Audited) 2 267 1 291 3 558
Changes in accounting policy
(see note 4) 16 1 17
Restated balance 2 283 1 292 3 575
Opening AC 133 fair value adjustment (17) (14) (31)
Transfer between reserves - -
Foreign currency translation
differences (18) (4) (22)
Cash flow hedging reserve (1) (1)
Attributable earnings 304 148 452
Dividends (117) (81) (198)
Issue of share capital 19 19
Change in shareholding of subsidiaries 36 (134) (98)
Decrease in loans with outside
shareholders - (16) (16)
Effect of adopting proportionate
consolidation - (109) (109)
Balance at 29 February 2004 (Audited) 2 489 1 082 3 571
Transfer between reserves - -
Foreign currency translation
differences (32) (3) (35)
Release of translation surpluses (67) - (67)
Cash flow hedging reserve 1 - 1
Attributable earnings 400 104 504
Dividends (143) (81) (224)
Issue of share capital 17 17
Change in shareholding of subsidiaries (53) (138) (191)
Decrease in loans with outside
shareholders - (10) (10)
Balance at 28 February 2005 (Audited) 2 612 954 3 566
ABRIDGED CASH FLOW STATEMENT
2005 2004
Figures in R millions (Audited) (Audited)
Operating activities 750 795
Cash generated by operations 1 122 795
Net investment income 40 106
Changes in working capital 78 387
Taxation paid (266) (295)
Cash available from operating
activities 974 993
Dividends paid, including to
minority shareholders (224) (198)
Investing activities (1 381) (327)
Financing activities 155 68
Net funds (utilised)/generated (476) 536
Cash and cash equivalents -
beginning of year 2 004 1 510
Translation of foreign cash (8) (4)
Effect on cash of adopting
proportionate consolidation - (38)
Cash and cash equivalents
- end of year 1 520 2 004
OPERATIONAL CONTRIBUTION
2005 2004
Figures in R millions (Audited) % (Audited) %
Revenue
Altech 5 552 45 4 143 41
BTG 2 906 24 2 607 26
Powertech 3 740 31 3 332 33
Corporate and financial services 8 - (37) -
12 206 100 10 045 100
Operating income*
Altech 493 51 333 46
BTG 226 23 185 26
Powertech 245 25 207 29
Corporate and financial services 4 1 (7) (1)
968 100 718 100
% held at
Headline earnings 2005
Altech 57,9 192 43 170 45
BTG 51,8 75 17 56 15
Powertech corporate and
financial services 100,0 178 40 151 40
445 100 377 100
*Operating income is stated before goodwill amortised/impaired and capital
items
SUPPLEMENTARY INFORMATION
2005 2004
Figures in R millions (Audited) (Audited)
Borrowings 519 524
- long-term 489 277
- short-term 30 247
Empowerment funding obligation
- long-term 172
Capital commitments 77 80
Capital expenditure 333 221
Contingent liabilities 27 27
Depreciation and amortisation 191 129
Lease commitments 442 292
Unlisted investments
- Carrying amount 423 183
- Directors` valuation 479 287
SEGMENTAL ANALYSIS
2005 2004
Figures in R millions (Audited) % (Audited) %
Revenue
Telecommunications 4 713 39 3 756 38
Power electronics
& multimedia 3 723 31 3 604 36
Information technology 3 835 31 2 848 28
Corporate, financial
services and eliminations (65) (1) (163) (2)
12 206 100 10 045 100
Operating income*
Telecommunications 356 37 253 35
Power electronics
& multimedia 227 23 229 32
Information technology 377 39 216 30
Corporate and
financial services 8 1 20 3
968 100 718 100
*Operating income is stated before goodwill amortised/impaired and capital
items
Notes
2005 2004
Figures in R millions (Audited) (Audited)
1.Capital items
Foreign currency translation
reserve realised 67 -
Release of restructure provision 44 -
Impairment reversal/(losses) 5 (10)
Net (loss)/gain on disposal
and closure of businesses (9) 4
Net gain on disposal of
property, plant and equipment 7 1
114 (5)
2.Reconciliation between earnings
and headline earnings
Attributable to ordinary and
participating preference shareholders 400 304
Goodwill amortisation and impaired 300 134
Capital items - gross (114) 5
Share of associates goodwill amortised 2 1
Tax effect of above adjustments (11) (1)
Minority interest in adjustments (132) (66)
Headline earnings 445 377
3.Reconciliation between attributable
earnings and diluted earnings
Attributable to ordinary and
participating preference shareholders 400 304
Interest earned on proceeds 13 -
Additional earnings attributable
to minorities in subsidiaries (44) -
Minority interest in adjustments 8 -
Diluted earnings 377 304
Fully diluted earnings and headline earnings have been calculated on the basis
that:
-Kagiso Strategic Investments (Pty) Ltd exercised its full option on 22% of the
shares in Bytes Technology Group South Africa (Pty) Ltd effective 1 March
2004. It is assumed that the proceeds of the issue of these shares of R198
million would have attracted interest at 6.65% after tax for the full year
under review.
-The deferred recognition of the 30% interest of the Izingwe Consortium in
Aberdare Cables less dividends utilised to repay the funding obligation.
Previously any premiums or discounts on subsequent purchases of equity
instruments from minorities were taken to profit or loss as a capital item in
the income statement.
The comparative amounts have been appropriately restated.
4. Accounting policies
The annual results have been prepared in accordance with South African
Statements of Generally Accepted Accounting Practice.The auditors, KPMG Inc.
have audited the annual results, and their unqualified audit report is available
for inspection at the Company`s registered office. The accounting policies used
in the preparation of the annual financial results are consistent with those
used in the annual financial statements for the year ended 29 February 2004,
except for the following:
IAS 1 - Presentation of financial statements
The group has early adopted the requirements of IAS 1. The presentation of
comparative financial information has been reclassified accordingly.
Premiums and discounts arising on subsequent purchases from or sales to
minority interests in subsidiaries
Following the reclassification of minority interests as equity any increases and
decreases in ownership interests in subsidiaries without a change in control
are recognised as equity transactions in the consolidated financial
statements.
Accordingly, any premiums or discounts on subsequent purchases of equity
instruments from or sales of equity instruments to minority interests are
recognised directly in the equity of the Altron shareholder.
Previously any premiums or discounts on subsequent purchases of equity
instruments from minorities were taken to profit or loss as a capital item in
the income statement. The comparative amounts have been appropriately
restated.
Year Years
ended ended
29 02 04 28 02 03
Effect on capital items (39) (44)
Tax effect - 2
Minority interest 3 19
Net effect (36) (23)
Decrease EPS (cps) (13.0)
Revised AC 140 - Business combinations, AC 128 - Impairment of assets and
AC 129 - Intangible assets
The group has applied the requirements of the above revised accounting
statements on a prospective basis on business combinations with agreement
dates on or after 31 March 2004. The accounting treatment applied to business
combinations with agreement dates prior to 31 March 2004 has been consistently
applied in respect of the group`s previous accounting policies in this regard.
AC 501 - Accounting for Secondary Tax on Companies (STC).
In terms of the statement a deferred tax asset should be recognised on the
unused STC credits when it is probable that such unused STC credits will be
utilised in the future. The comparative amounts have been appropriately
restated.
Year Years
ended ended
29 02 04 28 02 03
Effect on deferred taxation (3) 17
Minority interest 1 (1)
Net effect (2) 16
(Decrease)/increase in EPS and HEPS (cps) (0.8)
Opening retained earnings
as previously stated 1,762 1,514
Net change of STC credits 14 16
Net change of premium on
equity movements (59) (23)
Opening retained
earnings restated 1,717 1,507
Black Economic Empowerment (BEE) transactions
BEE transactions involving the disposal or issue of equity interests in
subsidiaries are only recognised when the accounting recognition criteria of
ownership of such equity instruments have been fully met. Although ownership
of such instruments may have legally transferred to the BEE partner the de-
recognition of such equity interest sold or recognition of equity instruments
issued in the underlying subsidiary by the Altron shareholder is postponed
until accounting recognition criteria of ownership have effectively been
satisfied.
5. It is group policy for a dividend to be declared after the end of the
financial year.
Message to our shareholders
HIGHLIGHTS
- Revenue up 22%
- Operating income up 35%
- HEPS up 17%
- Dividend up 21%
Your directors are pleased to report that the Altron group has posted good
results for the year ended 28 February 2005, which also marks the 40th
anniversary of the group.
BUSINESS ENVIRONMENT
Economic confidence in South Africa is strong, driven by declining interest
rates, a stable inflationary environment and accelerating GDP growth. We
anticipate that these conditions will continue in the forthcoming financial
year. This has resulted in buoyant local trading conditions. The continued
strengthening of the rand has impacted exports, but this was more than offset
by strong performances in the South African market. Investment in the
infrastructure and in the building and construction sectors, primarily due to
government expansion programmes and low interest rates, has continued to be
beneficial to the group and, in particular, to Power Technologies (Pty) Limited
which operates in the power electronics sector.
In the telecoms sector, opportunities continue to arise due to the announced
liberalisation of the telecoms market in South Africa. Altech`s recent
investments have increased our exposure to the mobile telecoms market, both in
South Africa and the rest of Africa and should provide excellent opportunities
for growth in this sector.
Conditions in the information technology sector are improving with profitable
growth opportunities in niche technology areas. Our subsidiaries, Altech and
BTG, are currently benefiting from opportunities related to the conversion
within the banking industry to the Europay Mastercard Visa (`EMV`) standard
through NamITech, Altech Card Solutions and Bytes Specialised Services
(previously known as National Data Systems). Consolidation continues within
the local IT market and BTG`s acquisition and integration of CS Holdings is
progressing in line with expectations.
FINANCIAL OVERVIEW
ALTRON`s revenue increased by 22% to R12.2 billion compared to R10.0 billion
in the prior year based on strong organic growth as well as the
contribution from recent acquisitions in the form of NamITech,Altech Econet
Wireless(`a|e|w`)(previously known as Econet Wireless Global)and CS Holdings.
The effect of these acquisitions combined with improved operating margins
resulted in operating income increasing by 35% from R718 million to R968
million. Operating margins showed an overall improvement from 7.1% to 7.9%.
Headline earnings per share increased by 17% from 138 cents to 161 cents,
notwithstanding an increased effective tax rate up from 36% to 40%. This was
mainly due to increased goodwill amortisation and impairment charges and higher
STC payments.
The group`s balance sheet remains strong with cash and cash equivalents at R1.5
billion down from R2 billion at the end of the last year notwithstanding that in
excess of R1.2 billion was invested during the year in related investments.
These included Altech`s acquisition of 85% of NamITech, 50% plus one share of
Econet Wireless Global and the purchase by Altech of 7.6% of its issued shares
from Altron which are currently held as treasury stock. BTG in addition acquired
CS Holdings effective 17 November 2004. These outflows were partially offset by
strong operating cash flows, improved cash flow from working capital management
and cash proceeds from the BEE equity partners.
ALTECH once again delivered pleasing results for the year ended 28 February
2005. Outstanding performances were achieved by Autopage Cellular, Netstar,
NamITech, Isis, Alcom Matomo and Alcom Radio Distributors. With all export
customers requiring dollar denominated pricing, the volatility and strengthening
of the rand created pressure on the results of UEC Multi-Media (`UEC`) despite
an 8% increase in unit volumes over the previous year. Altech`s revenue
increased by 34% to R5.6 billion, with operating income increasing by 48% to
R493 million, with NamITech being included for the first time. Headline earnings
per share increased by 12% to 339 cents. Return on shareholder`s equity remains
in excess of 20%, with cash on hand of R812 million after investments in
acquisitions in excess of R960 million and the share buy-back of R257 million.
The dividend increased by 21% to 174 cents per share.
BTG performed above expectations with revenues increasing 11% of
which approximately half the increase was related to the inclusion and
successful integration of CS Holdings for the last four months of the year.
Operating income rose by 22% to R226 million from R185 million for the prior
year while net financing costs decreased by 40% to R15 million from R25
million. Improved efficiencies in most of BTG`s operations enabled the
operating profit margin to improve from 7.1% to 7.7%.
This resulted in headline earnings per share increasing by 32% to 89.7 cents.
BTG declared a dividend per ordinary share of 32 cents which represents an
increase of 45% over that of the previous year.
POWERTECH reported a healthy increase in revenue of 12% to R3.7 billion
despite the impact of the stronger rand on certain of its
businesses and the resultant competition from foreign imports. Operating
income increased by 18% to R245 million from R207 million the previous year.
The operating margin has improved to 6.5% from 6.2% despite substantial price
increases in raw materials such as copper, aluminium and lead which was driven
by increased global demand.
FINTECH experienced a relatively slow start to this financial year, but during
the second six months record levels of new business have been written. As a
result, new business written for the 12 months of R493 million is up some 55%
on the prior year of R317 million. The purchase by BTG of the TAR warehouse
from Altron, the vehicle in which all new originating business from BTG
operations is financed, was concluded and was effective from 1 March 2005.
BLACK ECONOMIC EMPOWERMENT
The launch of the Altron Transformation Vision 2010 document, which is
essentially a group internal charter and scorecard, took place towards the end
of the year and reflected Altron`s commitment to preparing its companies for
the implementation of the ICT and other relevant Charters applicable to the
group`s operations once they have been finalised.
In line with the Altron Transformation Vision 2010 targets, the group has made
significant progress with regard to equity deals with Black Economic Empowered
broad-based partners at either holding company or operating company level
throughout the group. These include agreements entered into in respect of:
- The sale of 27% of BTG SA to Kagiso
- The sale of 30% of Aberdare Cables to Izingwe
- The sale of 28% of NamITech to Pamodzi
- The sale of 25.01% of Altech Data to Pamodzi.
With regard to our equity partners we are now focusing on creating `anchor`
partners in our three main operating companies, being Kagiso within BTG SA,
Izingwe within Powertech, and Pamodzi within Altech and Kagiso within BTG.
Through these partnerships significant value is added in terms of commercial
input and in meeting the various Altron Vision 2010 targets with regard to the
broader BEE indicators, namely: skills development, employment equity,
affirmative procurement, enterprise development and corporate social investment.
ACTIVITY HIGHLIGHTS
- Altech`s acquisition of 50% plus one share of Econet Wireless Group Limited
(`EWG`) to become a joint controlling partner in a|e|w, a newly branded company
for global mobile and satellite telecommunications networks based primarily in
Africa, became effective during December 2004. Altech disbursed US$70 million
in cash relating to its investment in a|e|w, of which US$30 million is held in
escrow with the interest thereon accruing to Altech. This cash is earmarked for
future investments in the telecoms market, in Africa and elsewhere.
- The successful integration of the NamITech business into Altech has
contributed meaningfully to its earnings during the year under review.
NamITech has achieved market leader positions in numerous areas of its
business, including cellular cards (`SIM`s`), cellular prepaid vouchers,
EMV credit/debit cards and cheque printing. The NamITech manufacturing
facilities situated in South Africa were upgraded during the past year in
expectation of increased volumes of products for the banking and mobile markets.
- Altech has, through its secure technology business NamITech Holdings
Limited, established a 75% held GSM prepaid voucher manufacturing subsidiary,
NamITech West Africa Limited, based in Lagos, Nigeria. The venture is
partially owned by Nigerian-based investors, thereby enhancing the envisaged
prospects for the company.
- BTG`s acquisition of CS Holdings obtained approval from the Competition
authorities in November 2004, for a consideration of R45 million. This
acquisition provided BTG with critical mass within certain operations and
increases BTG`s service offerings and market coverage.
- Altech effected an earnings enhancing buy-back of 7.6% of its issued share
capital during the first six months of the year.
- BTG`s purchase of Altron`s interest in the lease financing business relating
to products marketed by operations within BTG, became effective on 1 March
2005 for a consideration of R43 million.
- BTG SA acquired a further 60.87% interest in Digital Healthcare Solutions
(`DHS`) from Business Connexion, Netcare and USAP and BTG sold its 39.13%
interest in DHS to BTG SA, effective 1 March 2004. Following the acqusition and
restructure, BTG SA will hold a 100% interest in DHS.
OUTLOOK
Based on recent positive developments in the sectors in which the group
operates, the directors remain confident about the prospects of the group for
the forthcoming financial year. With the strength of the balance sheet, the
group is well-positioned to take advantage of further investment opportunities
that may arise. The outlook for the South African economy over the medium-term
remains positive. The significant restructuring and enhanced operating
efficiencies that were implemented during the past year should provide an
improved performance from the group`s operations. As a result, continued growth
is expected for the year ahead.
ACKNOWLEDGEMENTS
The board remains indebted to all of the stakeholders of the group - staff,
customers, business partners and shareholders - for their support, which has
enabled the group to become one of the more successful ICT and power electronics
organisations in South Africa.
DIVIDENDS
The following dividends are hereby declared in respect of the year ended 28
February 2005
- ordinary dividend No. 57 of 63 cents per share (2004: 52.0 cents);
and
- participating preference dividend No. 11 of 63 cents per share
(2004: 52.0 cents).
The above dividends are payable as follows:
2005
Last day for trading to qualify for and participate in
the dividend (cum dividend) Friday, 24 June 2005
Trading ex dividend commences Monday, 27 June 2005
Record date Friday, 1 July 2005
Dividend payment date
(electronic and certificated Register) Monday, 4 July 2005
Dividend cheques in payment of these dividends to certificated shareholders
will be posted to shareholders on or about Monday, 4 July 2005. Electronic
payment to certificated shareholders will be undertaken simultaneously.
Shareholders who have dematerialised their share certificates will have their
accounts at their CSDP or broker credited on Monday, 4 July 2005.
In the case of certificated shareholders, notice of any change of address of
shareholders must reach the transfer secretaries, Computershare Investor
Services 2004 (Pty) Limited, on or before Friday, 24 June 2005. Share
certificates may not be dematerialised or rematerialised from Monday, 27 June
2005 to Friday, 1 July 2005, both days inclusive.
On behalf of the board
Dr Bill Venter Robert Venter Diane Radley
Chairman Chief Executive Chief Financial Officer
10 May 2005
Directors
Dr WP Venter (Chairman), RE Venter (Chief Executive), IM Ayob, MC Berzack,
PMO Curle*, DA Hawton, Dr PM Maduna, JRD Modise, DC Mpofu, MJ Leeming,
DC Radley, PD Redshaw*, Dr HA Serebro, CG Venter, PL Wilmot
*British
Secretaries
Altron Management Services (Pty) Limited
Mr AG Johnston
Group Secretary
